Lennar

Annual Meeting: April 10, 2019

Stuart Miller, who gave up his position of CEO to become executive chairman in April 2018, received total compensation of $20,071,171 for 2018. The prior year, when he was CEO and his compensation was $19,127,533, Lennar was number 42 in As You Sow’s list of companies with Overpaid CEOs.

Miller, the son of co-founder Leonard Miller had served as CEO for 21 years before he took the newly created role as executive chairman. The change in title did not diminish his compensation. In fact, Lennar has had a trio of very highly paid executives for a number of years.

Rick Beckwitt, is the new CEO and his compensation was $17,583,466 little changed from last year when his title was different. A third member of the executive leadership team, Johnathan Jaffe, has also been paid over $15 million in each of the last three years.

The fact that there are three executives so highly paid underlines the disconnect between pay and performance. Last year only 77% of shareholders supported the company’s compensation plan.

The company has made several changes since that vote.  A significant portion of pay is now paid in performance awards. The “long-term” performance period is now based on three year rather than one year time periods.

However, Lennar continues to calculate annual incentive awards of the Executive Chairman, the CEO and President as a percentage of pretax income without an apparent cap. This year the company calculated the figure after a capital charge. In addition, the “Compensation Committee used its discretion to reduce by 10% Messrs. Miller’s, Beckwitt’s, and Jaffe’s cash bonus payments to $9,610,800, $8,294,252 and $7,241,013, respectively.”

The fundamental problem of the structure of these incentives as an uncapped percent of pre-tax income remains. Shareholders believe this risks potentially outsized payouts. Some would argue that it has already caused such outsized payments. These high cash bonuses came in a year when the stock price fell, from approximately $67 on January 1, 2018 to just a little over $40 one year later.

There are legitimate concerns as to how independently the Compensation Committee functions: according to the proxy statement, the Executive Chairman and CEO typically attend compensation committee meetings and “provide the Compensation Committee with evaluations of each named executive officer, including themselves.”

Rosanna Weaver